Saudi pact paves way to WTO

The European Union and Saudi Arabia yesterday signed a trade agreement which could ease the kingdom's path towards membership of the World Trade Organisation (WTO).

Although the deal allows Saudi producers some protection in areas such as dairy and poultry products, it is expected to make it easier for EU firms to win a share of the country's planned infrastructure spending as it opens up sectors such as telecommunications and construction.

It could also allow EU investors to take part in the privatisation of more than 20 publicly owned entities.

After the deal with the EU the only stumbling block between Saudi Arabia and a seat at the WTO is a similar agreement with the United States.

"We would like to finish the major steps already by the end of 2003. Very early next year, we should be in [the WTO]. That is our target," said Saudi trade minister Hashem Yamani.

Some analysts warned that striking a deal with the US would not be easy. "It will not be a piece of cake. It will not take a few months, it will take a year or more," one observer said.

EU trade commissioner Pascal Lamy said the deal could help discussions with the Gulf Cooperation Council, which takes in Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates as well as Saudi Arabia.

"I think [this agreement] is important for the whole region," Mr Lamy said yesterday, arguing that trade deals could help to promote stability in the troubled region.

President Bush has also promoted the idea of a free trade zone as a way of helping the Middle East.

One far-reaching issue that will be resolved by the pact is for the Saudis to give up double pricing of energy, the process by which domestic customers have been charged preferential rates compared with exporters.

The question of double pricing has hindered trade talks between the EU and Russia, and the Saudi deal could increase the pressure on Moscow to take a similar line.